BLOG:  Digital Financial Reporting

This is a blog for information relating to digital financial reporting.  This is my brain storming platform.  This is where I think out loud (i.e. publicly) about digital financial reporting. It is for innovators and early adopters who are ushering in a new era of accounting, reporting, auditing, and analysis in a digital environment.

Much of the information contained in this blog is synthasized, summarized, condensed, better organized and articulated in my book XBRL for Dummies and in the chapters of Intelligent XBRL-based Digital Financial Reporting. If you have any questions, feel free to contact me.

AccountingToday: Are the numbers right?

Are the numbers right?  Well, actually, many times no.  In an AccountingToday article, Are the numbers right?, Ranica Arrowsmith points out:

  • Finance execs blame human error for inaccuracies
  • Lack of automation contributes to human error
  • Clunky spreadsheets and outdated processes contribute to an inability to automate

Accounting and reporting processes tend to be outdated.  Manufacturing processes benefited from applying Lean Six Sigma philosophies and techniques. Further, the use of robotics in the manufacturing process improved processes.  The typical accounting department tends to not understand Lean Six Sigma philosophies and techniques and uses little to no real automation.

Don't think you can automate tasks and processesf?  Think again.  Read what Deloitte believes can be automated. Now, Deloitte does not tell you HOW to automate processes.  Also, I personally believe that Deloitte is over stating the opportunity.  Some tasks and processes can be automated.  Here are the basics as to how:

  1. Put information into structured and therefore machine-readable form.  Computers cannot reliably process unstructured information or information structured for presentation, such as spreadsheets. (Don't understand?  Watch How XBRL Works.)
  2. Create machine-readable rules.
  3. Use software to compare the machine-readable structured information with the machine-readable rules to make sure the information is mathematically consistent, logically consistent, etc.

Automated processes are already being used.  Unfortunately, not by the creators of financial reports and not remotely as extensively as is possible. But, software vendors such as XBRLogic, XBRL Cloud, and heck, I can even verify information using my processes.

Ultimately, intelligent software agents are going to be doing a lot more checking of the easy mundane and repetitive review tasks.  That will cause two things to happen.  First, the mundane and repetitive tasks will automated thus free up accountants.  Then, accountants will have more time to focus on the tasks that cannot be automated.

With the volume of information seemingly increasing at increasing rates and the complexity of information increasing as well; reviewing work is not just a matter of throwing even more bodies at the problem.

You can download a study undertaken by Blackline, Mistrust in the Numbers. Here are two nice infographics provided by Blackline:

Interesting stuff.

 

Posted on Monday, March 4, 2019 at 01:33PM by Registered CommenterCharlie in | CommentsPost a Comment | EmailEmail | PrintPrint

California Bill Could Require Public Agencies to Report Digitally

A California bill would require public agencies to report using XBRL. The bill, SB-598 Open Financial Statements Act, is summarized as follows:

LEGISLATIVE COUNSEL'S DIGEST:

This bill would enact the Open Financial Statements Act. The bill would establish the Open Financial Statement Commission, consisting of 7 members appointed by the Governor. The bill would require the commission to contract, through an open and competitive request for proposal process, with vendors possessing the necessary software development expertise to build one or more interactive extensible business reporting format (iXBRL) taxonomies suitable for public agency financial filings and create a software tool that enables a public agency to easily create iXBRL documents consistent with these taxonomies. Commencing with an unspecified fiscal year, the bill would require that any financial statement required by other law to be submitted or filed by a public agency be filed in iXBRL and to meet the validation requirements of the relevant taxonomy. The bill would make conforming changes to various other laws requiring state and local agencies to file or submit financial statements or reports. However, if the commission fails to adopt a prototype iXBRL taxonomy software and filing system for implementation by an unspecified date, the bill would dissolve the commission and make the requirement that a public agency file financial statements in iXBRL inoperative. The bill would appropriate an unspecified sum from the General Fund to the commission to be used for purposes of the Open Financial Statements Act, subject to specified restrictions.

The Reason Foundation provides additional commentary.

Remember that the State of Florida has a similar bill that has become law.

Here is information relating to the XBRL taxonomy that is being created.

 

Posted on Saturday, March 2, 2019 at 01:53PM by Registered CommenterCharlie in | CommentsPost a Comment | EmailEmail | PrintPrint

Updated Digital Financial Report Conceptual Model Documentation

I have updated the documentation of the conceptual model of an XBRL-based digital financial report. The model itself really has not changed, the documentation has just been tuned and explained a bit better.

The tuning is the result of work that I am doing with the OMG Standard Business Report Model working group.

The objective of all this work is to enable the creation of easy to use software that can be used to create high-quality XBRL-based financial reports.  Today, most software used to create XBRL-based reports is too hard to use and does not provide for the creation of high-quality (i.e. error free) financial reports.

Proof of this claim that software is not up to the task is the fact that most XBRL-based reports are created by filing agents and the number of flaws in even the high-level financial concepts being reported per my quarterly measurements.

Further, there are no real process improvements from the approach that is currently being used.  The structured nature of XBRL is not really being leveraged to improve processes.  What is happening is that additional work is "bolted on" to existing processes to generate the required XBRL-based reports.

There is a better way.

The Xerox Thieves: Steve Jobs and Bill Gates

The video, The Xerox Thieves: Steve Jobs and Bill Gates, explains one of the dumbest things a big company has ever done and how two smaller companies took advantage of that big mistake.

Proverb:

There are none so blind as those who will not see.

Xerox is not the only company to make a really dumb mistake.  There have been plenty of others.  Here are a few.

Posted on Friday, March 1, 2019 at 06:56AM by Registered CommenterCharlie in | CommentsPost a Comment | EmailEmail | PrintPrint

ESMA Explains Anchoring and 2020 ESEF Implementation Requirement

The ESMA created a nice little video, ESEF 2020: Implementation support for preparers, that provides information related to creation of the Inline XBRL documents to be required in 2020.  Included in this video is a good explanation of "anchoring".

Also provided is a tutorial for creating these reports.

Posted on Friday, March 1, 2019 at 06:45AM by Registered CommenterCharlie in | CommentsPost a Comment | EmailEmail | PrintPrint